Value-Based Insurance Design: Sense and Sensibility

A look at value-based insurance design, and how it provides a way to reduce financial barriers to care for people with chronic conditions.

An Improved Environment for VBID Adoption?

Four recent developments suggest that VBID adoption could ramp up in the near future.

First, the increasing emphasis on “value-based purchasing” seems consistent with VBID.16 As payers seek to purchase better quality and health outcomes for the dollars they spend, clinically nuanced benefit design is likely to receive increased scrutiny. Fendrick and colleagues, along with others,17 have recognized this opportunity and have expanded their concept of VBID to include benefit designs that encourage consumers to choose high-value providers. Using providers in the high-value tier would lower deductibles and coinsurance rates. Broadening the application of VBID principles in this way increases purchaser exposure to VBID principles but also risks diluting VBID’s focus on “clinical nuance.”

A second trend worth noting is growing public apprehension about the size of health plan deductibles, both in Affordable Care Act exchanges and private-employer coverage. Again, the concern is that they will discourage consumers from getting needed care or, if they seek care, create financial hardship. However, higher deductibles can benefit consumers financially if they result in lower premiums, or in the case of employees who work for self-insured employers, reduce rates of increase in their paycheck deductions. This discussion concerning the impact of high deductibles creates an opportunity for VBID advocates to make their case for more “clinically nuanced” coverages.

Third, the Choosing Wisely movement also has VBID implications.18 This movement includes efforts by various specialty societies to identify low-value (or no value) care and discourage its use. It can provide a platform for purchasers wishing to employ the “stick”—low or no-benefit coverage for some services—in VBID implementation. This, in turn, increases the chances that VBID will generate cost savings for purchasers, balancing the increased immediate costs of coverage for high-value services with reduced spending on low-value services. However, if VBID designs focus only on care identified by the societies, their potential impact would be limited. To date, many of the low-value services identified by specialty societies are low-volume services as well. Nevertheless, the Choosing Wisely discussion legitimatizes the notion of not covering low-value care—something that has been difficult for VBID to accomplish in practice.

Fourth, the ongoing, often vitriolic, debate over drug pricing has raised questions about how to more appropriately compensate manufacturers for the drugs they sell. One notion is that prices should reflect the value of drugs for patient care, rather than the sheer market power of manufacturers. The work of VBID advocates on how to structure benefit coverages to reflect value of care seems directly applicable to this question.19-21

An Impetus from Government?

The use of VBID appears to be growing among private purchasers, especially if tiered benefit designs are considered VBID programs. However, as noted, it is difficult to track this growth accurately. Perhaps more surprising is the growing adoption of VBID in government programs. The requirement that plans offered in Affordable Care Act exchanges cover preventive services could be viewed as an example of VBID. New rules have made the use of VBID in state Medicaid programs easier,22 and Congress is considering legislation that would expand opportunities to use VBID principles in health savings account plans8.

Most noteworthy, the Centers for Medicare and Medicaid Services (CMS) is testing a VBID model in its Medicare Advantage program.23 The model, which will run for 5 years, was launched in 7 states on January 1, 2017. Medicare Advantage plans in these states will be able to vary their benefit designs to reduce cost sharing and/or add services to enrollees with specified chronic conditions.24 The plans also can choose to structure financial incentives to reward the use of high-value providers for treatment of specific conditions.25 Three more states, as well as additional conditions, will be added in 2018.24

The evaluation of the demonstration likely will provide a basis for decisions about further expansion among Medicare Advantage plans and, as some interest groups advocate, the use of VBID in traditional Medicare as well.26 The very fact that Medicare is willing to undertake the demonstration could encourage broader take-up of VBID principles in the private sector.